ISLAMABAD, June 21: The extension in deferment of the capital gains tax, allegedly under pressure from a lobby, is expected to deprive the national kitty of over Rs112 billion during the next fiscal year 2007-08.

Informed sources told Dawn on Thursday that the Central Board of Revenue (CBR) had proposed imposition of the capital gains tax on stock exchange, banks, real estate etc., but the proposal was dropped in the special cabinet meeting headed by prime minister before the announcement of the budget for 2007-08.

The government has deferred the imposition of capital gains tax till December 2008. The levy was scheduled to be effective from December this year but it was extended for one more year due to pressure from a vested lobby.

A source in the finance ministry told Dawn that the government avoided imposition of the levy on stocks, property and banks in the election year as it might annoy big guns in the business community.

Had this exemption not been extended the government would have sufficient amount of more than Rs100bn which can be used in poverty alleviation. The sources said that this was just a rough estimate and much more than of the projected figures of the economic wizards might be raised through this tax.

This evasion of income tax can be proved with one example of the banking sector where they declared pre-tax profits at Rs93.8 billion in the tax year 2005 as against the post-tax profits of Rs63.3 billion during the same period, according to official figures compiled by the CBR.

The banks deposited Rs30.5 billion with the income tax department in tax year 2005. However, after application of prevailing rates to gross profit, the taxable amount become quite higher than the actual tax paid by the sector, which comes to Rs38.5 billion.

This showed that the banking sector had paid Rs8 billion less than the actual paid amount. Apparently it seems the tax evasion, nonetheless there may be justification or some reasons like exemption of capital gains etc., but than too the difference may not be in billions.

However, the CBR has made attempts many times but the levy was not imposed due to one or another reason, the source added.